Greece imposes spending controls to appease lenders

ATHENS Mon Nov 19, 2012 8:06pm IST

A man walks past a newspaper featuring Greek Prime Minister Antonis Samaras in central Athens November 15, 2012. REUTERS/John Kolesidis

A man walks past a newspaper featuring Greek Prime Minister Antonis Samaras in central Athens November 15, 2012.

Credit: Reuters/John Kolesidis

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ATHENS (Reuters) - Greece approved laws on Monday to enforce budget targets and ensure privatisation proceeds are used to pay off debt, seeking to appease foreign lenders before a critical meeting of euro zone finance ministers.

Athens said the decrees - in addition to an austerity package passed earlier this month - completed its obligations to lenders before Tuesday's Eurogroup meeting, which it hopes will unlock more aid to stave off bankruptcy.

"We have delivered, fulfilling the final pledges we made," Greek government spokesman Simos Kedikoglou told Reuters.

The government decrees - which go into force immediately and do not require parliamentary approval - stipulate proceeds from privatisation go into a special escrow account and impose automatic cuts on public sector units that miss budget targets.

European paymaster Germany, which has long been sceptical of Greece's commitment to reform, had pushed for the measures, according to sources close to the matter.

After lengthy talks with Prime Minister Antonis Samaras on Sunday, Finance Minister Yannis Stournaras said Greece was "fully ready" for the Eurogroup session.

Asked about Greek declarations that the government has completed the major steps required of them at this stage, a senior euro zone official said: "They have done so, and two small items remain to be done before disbursement."

Still, prospects for a swift disbursement of more than 30 billion euros in bailout aid remain cloudy as Greece's euro zone and International Monetary Fund lenders squabble over how to resolve the country's debt crisis.

IMF officials have said some writedown of Greek debt held by euro zone governments is inevitable, but Germany has rejected the idea of taking a loss on bond holdings.

DESTROYING SOCIETY

Greek opposition leader Alexis Tsipras attacked the use of decrees saying the country risked becoming a "debt colony".

"At tomorrow's Eurogroup meeting, a voiceless, surrendered government will go cap in hand to await what others will decide for it," Tsipras, head of the radical leftist Syriza party, told a news conference. The party's popularity has been growing.

One of Monday's decrees requires money from selling state assets to be paid within 10 days into the escrow account at the Greek central bank, set up under the country's second bailout deal with the European Union and IMF last March.

It also imposes curbs on public sector borrowing from 2014 and sets up automatic spending cuts or tax hikes if budget targets are missed.

A second decree cuts the pensions of parliamentary workers, who nearly derailed a vote on austerity measures earlier this month by walking out, forcing the government to hastily withdraw an amendment that would have cut their pay.

Powerful unions and shaky political will have impeded Greek efforts to overhaul its bloated public sector.

Municipal employees blocked city services in Athens on Monday, protesting about plans to earmark about 2,000 government workers for possible dismissal by the end of the year.

At the health ministry, workers blocked doorways and held banners reading "No to layoffs!".

Protests have surged in recent weeks. Dozens of mayors across the country have refused to send lists of employees who would fall under the scheme and plan to challenge it in court.

"We have the right to resist measures that destroy society," said Iraclis Gotsis, mayor of the Athens suburb of Nea Ionia on state television NET. (Writing by Deepa Babington; Editing by Ruth Pitchford)

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